Allianz Annual Report 2012

Recognition and recoverability of all significant deferred tax assets are reviewed by tax professionals at Group level and the ­Allianz Group Tax Committee. PENSION LIABILITIES AND SIMILAR OBLIGATIONS As of 31 December 2012, the ­Allianz Group reported pension liabilities for defined benefit plans of € 19,228 mn which is offset by the fair value of plan assets of € 11,206 mn. 1 Liabilities for pension and similar obligations and related net pension expenses are determined in accordance with actuarial valuation models. These valuations rely on exten- sive assumptions. Key assumptions including discount rates, inflation rates, expected returns on plan assets, com- pensation increases, pension increases and rates of medi- cal cost trend are defined centrally at the ­Allianz Group level considering the circumstances in the particular coun- tries. In order to ensure their thorough and consistent de- termination all input parameters are discussed and de- fined, taking into consideration economic developments, peer reviews, currently available market and industry data as well as historical performance of the plans and their as- sets. The discount rate assumptions are determined by reference to yields of high-quality corporate bonds of ap- propriate duration and currency at the balance sheet date. In countries where there is no deep market in such bonds, market yields on government bonds are generally used as discount rates. Expected returns on plan assets are deter- mined based on the plan asset mix and observed historical returns. Due to changing market and economic conditions the un- derlying assumptions may differ from actual develop- ments. Potential financial impacts from deviations in cer- tain critical assumptions based on respective sensitivity analyses are disclosed in note 47. RESTRUCTURING PROVISIONS As of 31 December 2012, the ­Allianz Group reported a provi- sion for restructuring programs of € 304 mn. 2 Provisions for restructuring programs are recognized when the ­Allianz Group has a detailed formal plan for the restruc- turing and has raised a valid expectation in those affected that it will carry out the restructuring by starting to imple- 1 Please refer to note 2 Summary of significant accounting policies, and note 47 Pensions and similar obligations, for further details. 2 Please refer to note 2 Summary of significant accounting policies, and note 49 Restructuring plans, for further details. ment the plan or by announcing its main features. The de- tailed formal plan of a restructuring program is in particu- lar based on estimates and assumptions, such as the number of employees to be dismissed, amount of compen- sation payments, impacts of onerous contracts, possibili- ties of sub-leases, timing of the various steps of the pro- gram and in consequence timing of the expected cash flows. Generally, the subsidiaries, which are undertaking the re- structuring program, set up a formal plan and determine all underlying estimates and assumptions. Therefore, it is the ­Allianz Group’s policy that the subsidiaries are respon- sible for an adequate planning process, controlling the execution of the program, and for the fulfillment of all re- quirements of IFRS. The respective documentation has to be submitted to the ­Allianz Group Accounting department, where qualified staff members review all restructuring pro- grams. This includes a review of all estimates and assump- tions, and an assessment of whether all requirements for setting up a restructuring provision are satisfied including which cost components can be treated as restructuring charges. Annual Report 2012 Allianz Group248